Brazilian Retail Sales Plummet

The latest data out of Brazil is showing a surprisingly sharp drop in the Retail Sales figures for the month of August. Information just released has recorded a plummet in activity in the consumer sector. Retail Sales when measured year on year have contracted by -0.9%, this follows an expansion of 0.8% the previous month but badly missed the market expectation for a further rise of 1.9% in today’s number. The month on month retail sales reading is showing a decline of -1.1%, this is a further fall on prior month’s reading of -0.7% and also presented a negative surprise based on the anticipated growth of 0.5% expected today.

Infrastructural projects, visitor numbers and marketing opportunities from the hosting of the World Cup should have provided a boost to the Brazilian economy. Growth figures from the start of this year however tell a different story. Brazil is technically in recession according to the first two quarters GDP figures, which showed a contraction of 0.2% in Q1 followed by a deeper contraction of 0.6% in Q2. Forecasts for Latin America’s largest economy don’t appear to show any imminent improvement in the situation. Economists GDP Growth predictions for the full 2014 calendar year have been revised down 15 times so far since January, the current projection is for just 0.48% growth, the outlook for 2015 is a slightly more impressive 1.10% expansion in GDP.

Exacerbating the economic contraction is the stubbornly high inflation rate, this is estimated to fall slightly in the next quarter to finish the year at about 6.3% from the current 6.5%. Monetary authorities however have their hands tied as double digit interest rates have little room to rise further, although it is though that the current level of 11% could be taken as high as 11.75% before the end of the year.

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